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Which top colleges are most welcoming to low-income students? The Upshot used the percentage of students receiving Pell grants along with net price of attendance for low- and middle-income families to find the most economically diverse top colleges.

The biggest theme to emerge from our analysis is that otherwise similar colleges often have very different levels of commitment to economic diversity….

Similarly, by looking at schools on the list like Barnard and U.N.C.-Chapel Hill, it’s clear that otherwise dissimilar colleges show similar economic diversity.

How many low-income students actually graduate?

An additional data point that would be informative is the graduation rates for Pell grant recipients at these schools. That’s a significant measure of how well a college serves its low-income students.

Low-income families can look at these lists and search out other information to help them understand how welcoming a particular college would be for their child. Schools that partner with the Posse Foundation, a support program for that enjoys a 90% graduation rate for its participants, should be considered.

… In the 1970s, the maximum Pell grants for low-income students covered nearly 80 percent of costs at the average four-year public university, but by 2013-14 they covered just 31 percent. Presidents beginning with Bill Clinton introduced costly new tax policies to help with tuition, but these have failed to improve access for the less well off.

Perhaps if Pell Grant funds were spent more efficiently, they could be used to cover a higher percent of costs for qualifying students.

‘Pell Grants Shouldn’t Pay for Remedial College’

… A huge proportion of this $40 billion annual federal investment is flowing to people who simply aren’t prepared to do college-level work. And this is perverting higher education’s mission, suppressing completion rates and warping the country’s K-12 system.

Current Pell Grant spending is wasteful.

About two-thirds of low-income community-college students — and one-third of poor students at four-year colleges — need remedial (aka “developmental”) education, according to Complete College America, a nonprofit group. But it’s not working: Less than 10 percent of students who start in remedial education graduate from community college within three years, and just 35 percent of remedial students earn a four-year degree within six years.

One solution would be to limit Pell Grant eligibility to students prepared to do college-level work. That could be accomplished by having colleges establish minimum requirements for admission based on rigorous entrance exams.

… A huge proportion of this $40 billion annual federal investment is flowing to people who simply aren’t prepared to do college-level work. And this is perverting higher education’s mission, suppressing completion rates and warping the country’s K-12 system.

Current Pell Grant spending is wasteful.

About two-thirds of low-income community-college students — and one-third of poor students at four-year colleges — need remedial (aka “developmental”) education, according to Complete College America, a nonprofit group. But it’s not working: Less than 10 percent of students who start in remedial education graduate from community college within three years, and just 35 percent of remedial students earn a four-year degree within six years.

A proposed solution

What if the government decreed that three years hence, students would only be eligible for Pell aid if enrolled in credit-bearing college courses, thus disqualifying remedial education for support?

Possible positive effects:

More resources could go to ambitious students, giving them an incentive to work hard to prepare for college-level work.

K-12 schools would become more accountable if they knew their graduates would only received college assistance if they were ready for college.

Colleges would become more selective, rasing their standards of learning.

Pell Grant money could be focused on the most qualified students, improving their chances of graduation.

In sum, disqualifying the use of Pell grants for remedial education would substantially reduce the gap between the number of students entering higher education and the number completing degrees.

Possible negative effects:

Yes, there are obvious downsides. Most significantly, many students wouldn’t be able to afford remedial education and thus would never go to college in the first place. Millions of potential Pell recipients — many of them minorities — might be discouraged from even entering the higher-education pipeline. Such an outcome seems unfair and cuts against the American tradition of open access, as well as second and third chances.

Then again, it’s not so certain that these individuals are better off trying college in the first place. Most don’t make it to graduation….

Perhaps the greatest risk is that colleges would respond to the new rules in a perverse manner: by giving credit for courses that used to be considered “remedial.” … would further dilute the value of a college degree.

Petrilli suggests the potential upside is sufficiently compelling to warrant a pilot program that would limit Pell Grants only to students ready to do college-level work.

Perhaps offer the deal to an entire state. Study what happens. My guess is that it would have a salutary effect on the K-12 system, on higher education and on college-completion rates. Let’s find out.

The impending federal budget cuts known as the sequester, which will go into effect on Friday without action by Congress, are poised to have a significantly negative effect on both public and private universities nationwide. Some forms of federal student aid and funding for a variety of research programs are likely to find themselves on the chopping block, according to the White House and university administrators.

Several critical revenue streams for universities are at risk: The National Science Foundation, National Institutes of Health and the National Endowment for the Humanities are all subject to cuts that fall within both the 7.6 percent cut to mandatory spending and the 8.2 percent cut to discretionary spending.

The ambiguity of how the sequester will affect student aid, jobs, and research is adding to a gloomy atmosphere for colleges and universities. Estimates on the dollar amounts and number of students affected differ significantly depending on the source.

How did the American Taxpayer Relief Act of 2012, AKA as the last-minute fiscal cliff legislation, affect college financial aid? Mark Kantrowitz gives an update.

The American Opportunity Tax Credit, which helps defray undergraduate college education expenses by allowing borrowers to deduct up to $2,500 in student loan interest, has been extended for five years, through the end of 2017.

Some changes to the Coverdell Education Savings Accounts have been made permanent. This means that the contribution limit has been increased to $2,000 from $500 and that the account may be used for elementary and secondary school expenses. Higher income phaseouts have also been made permanent.

The deal permanently repeals a five-year limit for deducting up to $2,500 via the Student Loan Interest Deduction. This means that students and families can claim on their tax forms student loan interest beyond 60 months.

What happens if no further action is taken to prevent across-the-board cuts of 8.2% in student aid that would be part of a delayed sequestration?

Unless Congress acts before March 1, Mr. Kantrowitz said, fewer students will be able to get work-study jobs and Federal Supplemental Educational Opportunity Grants, as these programs would experience cuts. Fees for federal education loans would go up, he added, and the maximum Pell Grant would be cut by as much as $400.

According to the New America Foundation’s Ed Money Watch, among the deductions that will expire or revert to lower levels are six that totaled $23 billion in 2012: the American Opportunity Tax Credit (AOTC); the exclusion from taxable income of employer-provided educational assistance; the exemption allowing parents to claim students aged 19-23 as dependents; the student loan interest rate deduction; several health care-related scholarships; and the Coverdell account provision allowing families to invest up to $2,000 annually in to an investment account for a child’s educational expenses with no taxes on earnings or withdrawals.

Recession and higher unemployment
I suspect that many people are “blissfully ignorant” of these and other implications of the upcoming fiscal cliff. For college students, the loss of these tax breaks is probably less likely to hurt them than would the lower GDP and rising unemployment brought on by higher taxes.

Next year the Pell Grant program will face a $5.7 billion shortfall and interest rates on federally subsidized students loans are scheduled to double to 6.8%. Given the pressure to curtail overall government spending, it’s prudent to expect changes in federal college aid programs.

Sequestration – The Pell Grant is protected from first-year cuts, but all federal student loan programs would be cut by 8.2% if no agreement is reached to avert the fiscal cliff.

Student loans — Several options have been discussed, including doing away with the subsidy but lowering interest rates by tying them to U.S. Treasuries. For the purpose of targeting lower-income students, it has been argued that the recently enhanced income-based repayment program does a more effective job than loan subsidies.

Pell Grant — A push to overhaul Pell grants has come from various directions, with a common perspective that they need to become more efficient and effective. Some ideas are to use the grants as an incentive for higher college completion rates and increased state aid for low-income students.

Does the government make a profit from student loans?

Even subsidized loans are a moneymaker for the federal government under the current accounting system, notes Sarah Flanagan, vice president for government relations and policy at the National Association of Independent Colleges and Universities.

But this is contested by a spokesperson for the Democrat-controlled Senate Committee on Health, Education, Pensions and Labor in a PolitiFact piece:

Subsidized loans do not make money for the government, Sessions said. They actually cost the federal government money.

Inflation, according to the government’s own statistics, is running at 2.7%. In other words, the government, which is the lender in the case of Stafford Loans, is already making 0.7% on its “subsidized” loans to undergraduates. And the inflation rate has been considerably lower in prior years, so the government has actually been making out like a bandit longer term. If it were to start earning 6.8% on these loans, like it’s already making on older loans, unsubsudized Stafford loans and Perkins Loans, the Treasury would be raking in huge profits on a loan program which is supposed to be helping make college affordable for lower income and middle-income students.

Now, the possibility that the federal government actually makes money on student loans may sound wildly improbable. Over the last several months we’ve heard repeatedly that keeping interest rates at the current level of 3.4 percent will “cost” the federal government $6 billion. Republicans want to pay for the reduced interest rates by trimming spending from health programs. Democrats want to go after tax breaks for businesses.

But the truth is that taxpayers do quite well by the student loan business. If you think about it just a little, it’s not hard to figure out why: The U.S. government pays almost nothing to borrow money that it lends out to college students at much higher interest rates. The current interest rate on a subsidized Stafford loan is 3.4 percent; on an unsubsidized Stafford loan the interest rate is 6.8 percent.

In lamenting the poor writing skills of his students, Rutgers University Professor Jackson Toby declares that remediation in college is usually too late to help poorly prepared students succeed. He argues that we are “sending the wrong students to college” and that literacy problems should have been addressed starting back in elementary school.

What college professors have to deal with

… Perhaps a third of the students averaged five to ten errors per page. They had computers equipped with spell-check, but that function couldn’t prevent wrong word usage. Many couldn’t keep straight when to use “there,” rather than “their” or “they’re,” “threw” instead of “through,” “sight” instead of “site,” “aloud” instead of “allowed,” “Ivy” instead of IV (intravenous), and “stranglers” instead of “stragglers.”

Parents have to instill the importance of education from an early age.

Contrary to the mantra that everyone should go to college and that the main obstacle is inadequate financial support from governments, students have to be fairly well prepared for higher education by the time they arrive on the college campus. Such preparation must begin much earlier in students’ lives, including convincing them that education has to be taken seriously if they aspire to interesting, well-paid jobs. Parents are more effective than teachers at instilling this message. Unfortunately, not all parents have their children’s education at the top of their agendas, especially parents with meager educations or serious personal problems. Poverty alone does not prevent parents from promoting high educational aspirations in their children.

Toby goes on to say that “even parents deeply concerned about their children’s education must find programs in which their children can learn the skills they will need”. With this I profoundly agree, having seen problems with ineffective curricula and teaching even in affluent suburban public schools. In the case of parents who can afford it, private tutoring may be the only way their children can learn the right skills.

A pragmatic approach

… Whatever the reasons for inadequate preparation, it is usually too late for remediation in college. Late-bloomers are mostly a myth. That being so, it is cruel to tempt all high school graduates to take out large loans to pay for college educations; for underprepared students, loans can be traps. For underprepared students compelled to default on loans they cannot repay, such loans in the one-trillion dollar portfolio of student loans are a disaster. The loans are an obstacle to becoming adults, to marrying, buying a home, and raising a family.

It’s better to emphasize vocational training and job preparation at community colleges rather than Pell grants and low-cost student loans. It isn’t a quick fix, but it’s more realistic.

Of course, Pell grants and subsidized loans are also available for vocational training. With limited exceptions, government financial aid should be limited to students who are adequately prepared to be successful in college. If that were the case, there would be different standards for vocational training and for four-year colleges.

Lack of accountability: The government hides results on a program that costs taxpayers billions of dollars each year.

2. How Do Pell Students Do?

Let us move on to the Pell Grant program, on which our nation spends more than $40 billion a year. Surely with such a large expenditure, we would have and publish detailed statistics on how recipients fare in college, right? NO. What is the percent of Pell Grant recipients at four-year colleges receiving their degree within four, five, or six years? The Department of Education has such data for graduates of every accredited school in the country -why don’t they have it for those receiving the federal government’s largest grant program?

My guess is that the figure is so embarrassingly low that the government doesn’t want it published. I wrote a year or so ago that the Pell Grant graduate rate, after six years, was 40 percent, based on a bit of statistical estimation I did. No one seriously questioned my result. For every two students who -after six years -succeed to get a degree, three fail. Yet spending on this program has expanded enormously in recent years.

… one-third is a larger number than one-fifth. Roughly a third of adults have four-year degrees, but only one-fifth of jobs are in the relatively high-paying fields. That is why we have a small army (115,000) of janitors with bachelor degrees. Rather than adding two million more enrollees at community colleges (as President Obama advocated in the first presidential debate), maybe we should have two million fewer Pell Grants or student loans in order to help, in the long run, to restore balance between supply and demand for college graduates in high- paying fields.

It may sound distasteful to hear someone promote a public policy position that supports less education for low-income students. On the other hand, encouraging young people who are at high risk for dropping out to take on burdensome debt may actually be the less charitable action in this case. Even awarding grants to students unlikely to graduate from college may turn out to be more cruel than kind if the next generation will have to deal with the painful deficit generated by this generosity. It’s a dilemma.